How are revenues for advertising services presented in Crepe De Licious's financial statements?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
Advertising Fees The Company maintains and administers an advertising fund (the "Advertising Fund"). The advertising contributions may be commingled in the general funds, but administratively segregated to form the Advertising Fund. All franchisees must contribute to the fund at the same rate of 3 percent of their respective gross revenues. The Advertising Fund may be used by the Company, in its sole discretion, to meet any and all costs of advertising for the franchise's concept as a whole. The Company has determined the advertising services provided to franchisees are highly interrelated with the franchise right and therefore not distinct. As a result, revenues for advertising services are recognized when the related revenue occurs. Revenues for these services are typically billed in the first week of the month and paid within thirty days. These revenues are presented as franchise contributions for advertising and other services. Expenses incurred to provide these services are presented as Franchise advertising expense and other services.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to the 2025 Crepe De Licious Franchise Disclosure Document, franchisees must contribute 3% of their gross revenues to the advertising fund. Although these contributions may be mixed with general funds, they are administratively tracked separately to form the Advertising Fund. Crepe De Licious can use this fund at its discretion to cover advertising costs for the franchise system.
Crepe De Licious considers advertising services to be highly interrelated with the franchise right, meaning they are not treated as distinct services. Consequently, revenues from advertising services are recognized when the related revenue occurs. These revenues are typically billed in the first week of each month and are due within thirty days.
In the financial statements, these advertising revenues are presented as franchise contributions for advertising and other services. The expenses that Crepe De Licious incurs to provide these advertising services are reported as franchise advertising expense and other services.